Refocusing Financial Goals

Sometimes, you need to rein things in a bit and refocus.

• Switch to term insurance … if you must have insurance. “He really doesn’t need insurance,” says Parrish. “Insurance is not an investment product; insurance is to hedge a risk.” However, if Hoosier insists on having it, Parrish recommends he switches to term, which he estimates to cost as little as $300 per year for someone Hoosier’s age. That would be possibly $1,900 less than the $2,200 that Hoosier pays annually now. Since Hoosier’s policy is for an older relative, a 30- or 40-year term is recommended. If Hoosier passes during this period, his mom would still get a $200,000 face value, same as his current whole life policy.

• Increase retirement contributions. Hoosier’s employer matches up to 6% and he has only been contributing 4%. Hypothetically, not contributing that extra 2% over a three-year period could accumulate to a loss of approximately $278,550 over a 30-year period, estimates Parrish. “In order to achieve his goal, he should increase his 401(k) deferral to 6.5%,” says Parrish, noting that $1 million in today’s dollars, adjusted for inflation, will only be worth $250,000 in 35 years.  Parrish suggests that Hoosier have 90% of his investments spread across large-, mid- and small-cap equities, with the remaining 10% in alternatives such as real estate and commodities. “I think he should continue to practice delayed gratification, invest in growth whenever possible, and continue to have a long-term focus when investing equities,” Parrish says.

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